PEG Ratio Calculator
Divide the P/E ratio by the expected earnings growth rate to get the PEG ratio — a growth-adjusted valuation gauge.
How it works
PEG = P/E ÷ annual EPS growth rate (%) · P/E = price ÷ EPS
The PEG ratio refines the P/E by dividing it by the company’s expected earnings growth rate, so a fast-growing firm and a slow one can be compared on a level footing. Peter Lynch popularized the rule of thumb that a PEG near 1.0 is fairly valued, below 1.0 is cheap for its growth, and above 1.0 is expensive. Because it leans entirely on a forecast growth rate, the answer is only as reliable as that estimate.
Worked example
A stock with a 25× P/E and 20% expected earnings growth has a PEG of 25 ÷ 20 = 1.25. That is above 1.0, suggesting the price is a little rich relative to its growth — even though a 25× P/E alone might look high, the growth partly justifies it.
Frequently asked questions
What PEG ratio is considered attractive?
By the traditional rule, a PEG below 1.0 suggests a stock is cheap relative to its growth, around 1.0 is fair, and above 1.0 is expensive. Treat it as a starting point, not a precise verdict.
How do I enter the growth rate?
Use the expected annual EPS growth as a whole percentage — for 15% growth, enter 15. The ratio divides the P/E by this number, so the units must match how P/E is quoted.
What are the weaknesses of PEG?
It depends heavily on a forecast growth rate that may not materialize, ignores dividends and risk, and can mislead for very low-growth or cyclical companies.
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Educational estimate, not investment advice.